Public Bill Committee

[Frank Cook in the Chair]

Frank Cook: I shall try to recapture the scene from Thursday afternoon. An hon. Member was in the process of thinking that he was permitting an intervention, but then changed his mind and decided that he had shut up for good. That allowed the Whip to move the motion for Adjournment. I appeal to Members to bear in mind that, when they are permitting an intervention, they must make it plain that they intend to come back and that they are not relinquishing the floor.

Clause 15

Carrying on of a reserved legal activity: employers and employees etc

Amendment proposed [14 June]: No. 108, in clause 15, page 7, line 15, at end insert—
‘( ) Where P is an independent trade union, persons provided with relevant services by virtue of—
(a) their membership or former membership of P, or
(b) another person’s membership or former membership of P,
do not constitute the public or a section of the public.’.—[Bridget Prentice.]

Question again proposed, That the amendment be made.

Frank Cook: I remind the Committee that with this we are taking Government amendment Nos. 109, 110, 138, 115 to 117, 126 to 128, 202 and 205.

Jonathan Djanogly: Reading through the Hansard reports of the debate on the amendments, I felt that the debate has raised more questions than it has answered. That is not surprising considering the lateness with which the amendments were tabled and the way in which the Government have done a U-turn at the behest of their union puppet masters. The White Paper stated:
“The Not for Profit (NFP) sector will be brought within the regulatory scope of the LSB and the ABS licensing scheme. This will ensure the same level of protection for consumers no matter where they obtain their legal services.”
The Government response to the Joint Committee on the Draft Legal Services Bill showed a slight shift in that position. It stated:
“We are currently working with the TUC to ensure that exemptions under the Legal Services Bill take account of the position reached with respect to trades union exemptions under the Compensation Act, and considering whether any further provision is needed in relation to the Bill regime.”
 The Compensation Act 2006 is different from the Bill in that it introduced regulation to a formerly unregulated sector, whereas the Bill will reform an existing regulatory regime. The key feature of the former approach is that the trade union exemption is not enshrined in statute; it is a matter for subsequent statutory instruments.
 The Conservatives’ basic position is that we oppose these unfair, illogical and rushed amendments, and I shall ask my hon. Friends to vote against them. However, if the Government wish to continue on such a course, they should make it clear that the Solicitors Regulation Authority may, if the Legal Services Board approves the necessary rules, require that lawyers provide services for trade union members only through a regulated entity. The Minister has a lot of thinking and explaining to do on what are, frankly, shabby proposals before Report, and certainly before they are dissected in the other place.
I would be grateful if the Minister came back on that point. It should be made clear that the SRA and other regulators may require that lawyers provide services for trade union members only through a regulated entity.

John Hemming: In a sense, the interruption of the intervention was quite helpful because it allowed someone to explain to me the reasons why the trade unions might be concerned about regulation. The vast majority of trade union activity, such as advising people and so on, will not be affected by the Bill. However, if a trade union became an alternative business structure, the legal advice activities of a trade union would be regulated. We could end up with a situation in which a whole organisation has a problem because a part of it is regulated. Obviously, we are not looking for that. The logical solution is to have a subsidiary ABS of some form or other rather than have the whole organisation as an ABS.
We take an agnostic approach to the amendments. We accept the objective. We do not want a situation in which a trade union convenor who is offering advice to union members on employment law ends up being regulated to the same extent as someone who sets themselves up in business to offer legal services in the widest sense, who carries out regulated legal services and who, as part of that, does unregulated legal services, which are caught in the same process of regulation.
Whether the amendments are drafted in the best possible way is an interesting question. There is probably a better way to draft them. However, we are relatively agnostic on the amendments themselves.

Simon Hughes: I want to make a different set of points and will not refer only to the trade union position. Will the Minister explain why she has not considered other organisations that have a similar relationship with their members? I represent the Hospital Saturday Fund, into which people pay money in order to help them at the time of their prospective medical or caring needs. It is a mutual organisation.

Henry Bellingham: On a Saturday.

Simon Hughes: No. Such activity can take place on any day of the week, in any week of the year. There are many mutual organisations into which people pay. In  another context, the Minister referred to the Royal Automobile Club and the Automobile Association. Many organisations have in-house lawyers who give legal advice. They are not trade unions, but potentially they have the same provision whereby two sorts of people give legal advice. There are in-house people from whom the organisation receives the service for which it signs up. They may commission a law firm if the issue is difficult or not run of the mill. I do not understand why the Government have come to the Committee—they have been reasonably criticised for so doing late in the day—with proposals that relate only to the trade unions, not to other organisations that have a similar relationship with their members.

Jonathan Djanogly: The hon. Gentleman makes an important point and, if we push it a little further, we come to not-for-profit organisations such as the citizens advice bureaux.

Simon Hughes: There are other organisations, but they are slightly different.
 We are debating who we are regulating, who will be governed by the umbrella of new arrangements and the dividing line. The Government have picked the one group of people with whom they have an affinity. Given the history of the Labour party, I absolutely understand that. I am not making a criticism. However, they are not applying the same principles across the board.

Stephen Hesford: Will the hon. Gentleman give way?

David Burrowes: Will the hon. Gentleman give way?

Simon Hughes: I shall give way to the hon. Member for Enfield, Southgate first because I saw him first.

David Burrowes: I am glad to hear the hon. Gentleman make those remarks. Does not his concern about the matter raise suspicion that a special case has been made because there is interest in and influence with trade unions, given that the Labour party apparently receives donations of more than £12 million from the unions? That has inevitably led to the accusation that that is one of the primary reasons why the Government are particularly supportive of the amendment.

Simon Hughes: It is the case that the Labour party was formed out of the trade union movement. It is still very much linked to the trade union movement, and it receives a lot of its funding from it. Debates may even be continuing today about party funding and the link. The Labour party is entitled to argue its case, but even a Labour Government have a duty to rise above it and to treat people fairly. I am not arguing that there may not be a perfectly reasonable set of circumstances, as my hon. Friend the Member for Birmingham, Yardley described, in which we can have an arrangement whereby the in-house people, giving the service that is expected, are exempt, while others are not exempt. However, I do not find it justifiable that provision is made for one set of organisations—those with which the Government party has a particular affinity—but not other organisations.

Stephen Hesford: Will the hon. Gentleman give way?

Simon Hughes: I will give way in a second. It is too early in the day to be excitable.
Will the Minister tell us what consideration she has given to other organisations; what advice she has sought; what advice she has been given publicly; whether the matter has been considered by external advisers; whether she has been advised by Committees of either House and what the Government’s conclusions have been across the board? If she does not, it will look like she is pulling the one favoured friend off the shelf and not giving other people in a similar position the same sort of status.

Stephen Hesford: The hon. Gentleman has been listening to the Tories on the Front Bench, who recognise U-turns as well as anybody; their leader has made three in as many weeks. Leaving that aside, if there are millions of reasons why the Government have tabled these amendments, it is because there are about eight million people in trade unions, and this is important legislation to secure their rights and to improve the representation on their behalf. However, the Hospital Saturday Fund that the hon. Gentleman talked about could have made a representation to the Minister on any day of the week, in the same way that the trade unions did. That may be why there has not been a different consideration.

Simon Hughes: I will ignore the general political knock-about at the beginning and turn to the substantive point. I am not aware whether the Hospital Saturday Fund or other such mutual organisations—I do not have in my head the list of respondents—considered the matter. If the amendments were tabled the week before last, by definition, people would not have had notice that the issue was on the agenda. That is my question: who have the Government talked to?

Stephen Hesford: Will the hon. Gentleman give way?

Simon Hughes: I will in a second. I understand that the trade unions have an interest and that they may well have made representations about the issue. We went around such a course not many weeks ago in the debate on the Compensation Bill. We debated how much the trade unions should be regulated, how to structure the Compensation Bill and how, once we had general legal regulations, to bring that into the structure of this Bill. I anticipated that. However, it is not an answer to say, “We are only legislating for this group to have a particular status because we have been lobbied a lot by it.” That is a very bad answer. The job of legislation is to treat fairly people in similar circumstances. People join other organisations in the same way that they join trade unions—for mutual aid and assistance and support when they need it.

Stephen Hesford: If the hon. Gentleman does not mind me saying, the bad point is his. Many months ago, I sat on the Joint Committee, in which the matter was raised on behalf of the trade unions. It is not a new point at all. All those other organisations that might have been affected were on notice many months ago.

Simon Hughes: I am aware that it is not a new point and I have conceded that. I said that the matter was debated not just in the pre-legislative scrutiny Committee, on which my hon. Friend and others sat, but in the context of another Bill brought forward not many months ago by the same Department—the Department for Constitutional Affairs. What was debated then was that, when the Legal Services Bill became law, the regulatory system would be expected to cover other organisations dealing with compensation. Therefore, the matter has been debated before. That is not an argument for having different treatment for organisations which effectively do the same job though under different names. There are many organisations that are not as big or take in as many people as the trade union movement, but that is no reason for them not to be considered. That is why I am asking the Minister to tell us what discussions there have been and why, if the organisations are different, they are sufficiently different not to be considered here.
 I should be grateful if the Minister elaborated on where exactly the line is drawn in her mind and her proposals between the sorts of activity that will be outside and inside regulation. As she knows, traditionally, trade unions have sometimes used in-house advisers, sometimes well-known trade union solicitors—I have put on record that I have been instructed by them, so clearly they act—and sometimes a combination of the two. There is no clear difference between the jobs done by one sort and by the other. In her winding-up speech, she needs to make it clear where she sees that line when it comes to trade unions.
To return to my main point, I am keen that the Minister should speak about other organisations that are similar, effectively. If people pay for a service, those organisations should have the same dispensation—if there is to be one—as trade unions and be included.

Frank Cook: Order. I address the following remarks to the whole Committee rather than to any individual. The common means of catching the Chair’s eye is to stand. The Chair has no means of realising that a speech is imminent if the hon. Member, or right hon. Member for that matter, does not stand. I simply remind the Committee of that, adding that comments to the Committee should be addressed through the Chair.

Henry Bellingham: I apologise, Mr. Cook, for not standing quite as swiftly as I should have done, and welcome you to the Chair of this Committee. I endorse what my hon. Friend the Member for Huntingdon said in his speech during the previous sitting. He spent much of the weekend mulling over what he would say this morning; he was interrupted by the best part of 90 hours.
Why were the amendments tabled so late? I find it quite extraordinary that they were not tabled in another place. After all, there was quite a delay. Second Reading in the other place occurred on 6 December, the Bill’s first day in Committee occurred on 9 January and it finally completed its passage through the other place on Tuesday 15 May. The Bill had a long passage.
The Minister pointed out that Lord Falconer mentioned on Second Reading that the Government were minded to table amendments respecting trade unions. Indeed he did, although it took me a little while to find the reference in his speech—it was thanks only to the diligence of the Minister’s private office that I was referred to the right paragraph. That long delay seems quite extraordinary. I ask her to put our minds at rest, because we are naturally curious. Certain representations have been made behind the scenes and discussions have taken place.
I take on board the point made by the hon. Member for North Southwark and Bermondsey—there are many other mutual bodies. I should declare an interest. When I was at the Bar, I did some work for various mutual societies and other bodies. Many of them had in-house lawyers who dealt daily with routine matters, but when the need arose, they sought outside solicitors to instruct counsel. Sometimes the in-house solicitors would instruct counsel, but there was a good working relationship between the two different types of lawyers. 
 The hon. Member for Wirral, West says that trade unions are different, because they have so many members. That is not a convincing argument, particularly when we know that the trade union movement is close to the governing party. The Conservatives want to work with the trade unions. I met fairly recently with Derek Simpson, and I have met with Brendan Barber. My party, in its new, invigorated modernising mode, is trying to reach out to all types of groups. We want to work with trade unions. As it happens, I am campaigning on different issues with a number of trade unions in my constituency. We have great respect for them. However, what I want to hear from the Minister is her justification for the apparent lack of consistency and for the timing. If she can provide that justification, the Opposition would feel a great deal more comfortable about this issue. Otherwise, I support my hon. Friend the Member for Huntingdon’s suggestion that we should vote against the amendments.

John Hemming: I would like to go back to the point raised in our previous sitting by the hon. Member for Bassetlaw, which was about industrial relations. He said that, where he is negotiating arrangements for members of his trade union, that is industrial relations and not a legal service.
Regarding the amendments, there is a certain amount of unanimity here, inasmuch as everyone here believes that industrial relations should not be regulated; we are not saying that they should be regulated. I think that everyone here, including the Conservatives, agrees that industrial relations, where one is negotiating on behalf of one’s members, should not be a regulated legal service. By definition in the Bill, it is not a regulated legal service. If everything just continued and the Bill were passed without the amendments, industrial relations would not be a regulated legal service.
If matters reach a certain point, the hon. Member for Bassetlaw and his colleagues in the trade unions put a test case through the courts. They do that by bringing in a firm of solicitors, who then contract barristers. The regulation of those lawyers is through the SRA, the Bar Council, or whatever body it may be, and that is not, in itself, a problem.
A question then arises, and this is where the Minister should clarify the situation: what is the reasoning behind the trade unions’ concern that the whole of a union would become a regulated body? Those are the circumstances that the hon. Member for Bassetlaw would find a problem. If the whole of the trade union becomes a regulated body because it wants to be an ABS, the problem is that the Bill will bring all the negotiations and informal advice by a union convener, wherever it is given, under the remit of the Bill. That is because, although such negotiations or advice are not regulated legal services, the union becomes a regulated legal entity and therefore everything is trapped.
Of course, one solution to that problem is for the trade union to have a subsidiary ABS, if it needs an ABS, so that a clear line is drawn around the regulated entity. That seems to be a tidier solution than this measure, but again it comes down to the details of drafting. One would be concerned, if the union is conducting case handling, such as claims management or whatever it may be, that it be done properly. Obviously, it is possible in those circumstances for the conduct of litigation to be managed within an ABS.

John Mann: The hon. Gentleman misses the fundamental point, which is that the consumer will lose out, because the decision made on advice is made by a lay representative. Is that not the case? That advice could be to go down the negotiating route, or it could be, at some stage, to bring in a solicitor. It is that advice that will be caught in a crossover, which would leave the consumer facing two directions simultaneously on the same piece of advice. It would be the consumer who loses out, whether these amendments or other amendments are made; we will hear from the Minister about whether other amendments will be tabled. That means that there is an absolute prima facie case for having one set of regulations and not two on behalf of the consumer.

John Hemming: I agree with the hon. Gentleman that there is a good case for having one set of regulations, with the certification officer regulating the activities of the trade unions, and industrial relations should not fall within the remit of the Bill. The question is this: what is the best way to achieve one set of regulations? Also, what is the best way of dealing with other mutual organisations? That was the point raised by my hon. Friend the Member for North Southwark and Bermondsey. We wait for the jewels of wisdom to come from the Minister on that matter. However, it is that clarity that is needed.
There is a reasonable chance, whatever happens today regarding these amendments, that future amendments from the Government may be necessary to clarify these issues. I would be interested to hear what the Minister has to say about that.

Bob Neill: I shall be brief. I support the concerns that have been raised, and I wish to make two points.
First, the hon. Member for Wirral, West said that the trade unions are important, and that they have some8 million members. I accept that. I accept also that some difficulties may need to be considered. That makes Conservative Members all the more suspicious about the timing of the amendments. The fact that the trade unions represent such a substantial constituency of interest and that they have links with the Government makes it all the more likely that such issues would have been flagged up very early in the gestation period of the Bill. Against that background, it is all the more surprising that such significant amendments should come so late in the day and at such short notice. It is a rhetorical question, but what on earth has been going on between then and now?
 Secondly, we have already asked the Minister for details of the discussions and the lobbying that took place that gave rise to the amendments. In answer to my hon. Friend the Member for North-East Hertfordshire (Mr. Heald), the Minister of State conceded in the House that there had been discussions with the trade unions. For exactly the reasons given by the hon. Member for North Southwark and Bermondsey and others, will the Minister tell us what other voluntary or mutual organisations made representations to the Department about potential difficulties? Why is it that the representations of one set of organisations seem to have been accepted, yet the representations of others have been ignored?

Simon Hughes: That is one question, but even if there were no representations from certain bodies or groups of organisations, a good Government and good officials should think about how the provision might apply across the board. I assume that the hon. Gentleman agrees that it is the Government’s duty to reflect upon the general interest and not to rely on lobbying to achieve exemptions.

Bob Neill: The hon. Gentleman is right. The two points are not mutually contradictory.
We would like to know the totality of lobbying or representations, so that we can work out why one group appears to have been favoured. For the reason that I advanced earlier—that a great number of people might be affected—it surely should have been anticipated at the beginning. Why was it not flagged up and brought forward much earlier? As yet, we have heard nothing convincing.

Bridget Prentice: There we have it. One part of the Conservative party says that it wants to cuddle the unions, and another part says, “It is favouritism. They are all getting special favours.” There is no change in the Conservative party.
I remind the Committee of the reason for the provisions. The amendments are designed to maintain the status quo for trade unions. The idea is that the trade unions should continue to provide services to their members, through their staff and representatives, without having to be regulated as an entity. In addition, there is existing trade union legislation.

Jonathan Djanogly: I intervene after the Minister’s first sentences because the point needs to be made that the status quo for many people is not good enough, particularly with regard to the miners compensation case. That is why change is being demanded.

Bridget Prentice: The hon. Gentleman is not right, but I understand why: as a member of the Conservative party, his knowledge and understanding of trade unions is obviously severely limited.

David Burrowes: I concede that the Minister has far greater knowledge and understanding of the unions, and a direct interest in them. She doubtless had that knowledge almost a year ago, when the Joint Committee raised concerns about regulating the role of the unions. Why, at this late stage, has there been a change of heart—why the urgency to amend the Bill, as the Minister says, in order to maintain the status quo? Surely, the Minister’s information on unions cannot have suddenly and dramatically increased.

Bridget Prentice: I am pleased that the hon. Gentleman mentioned the Joint Committee. I refer Opposition Members to paragraph 232 of the Joint Committee on the Draft Legal Services Bill report, which states:
“Trade unions are distinctive from other organisations and governed by their own legislation”.
That might be one of the answers as to the difference between trade unions and other mutual organisations. The report continues:
“We are concerned that the Bill restricts the ability of trade unions to act in their members’ interests, especially by placing on a legal footing the means by which trade unions provide advice and representation...we recommend that the Government also takes note of concerns expressed during the Committee Stage debate on the Compensation Bill in the House of Commons about the provision of legal services by subsidiary companies wholly-owned by trade unions”,
which is a salient issue. The TUC also recommended that
“the Government gives further consideration to any necessary exemptions from the draft Bill for trade unions”.
The Joint Committee made a clear recommendation that we give further consideration to the matter, and we have done so.

Stephen Hesford: I encourage my hon. Friend to pursue that line. The hon. Member for Enfield, Southgate, who just intervened, was a member of that Committee. Its recommendations were agreed unanimously, so I am surprised by the interventions that he and his hon. Friends have made this morning.

Bridget Prentice: I am grateful to my hon. Friend for reminding me of that. Perhaps the hon. Member for Enfield, Southgate is part of the cuddly side of the Conservative party, which wants to embrace trade unions, so we should forgive him.
I will come on to other organisations in a moment, but I first want to go through some of the issues that were raised in Thursday’s debate. We never intended that trade unions should be caught by the full ABS framework—they fell within it because of their ownership structure—but the regulatory issues that they raise are different from those raised by commercial bodies offering services to the public. In that sense, there is a difference between trade unions and some of the other organisations that have been mentioned today.
We have been asked why we did not propose the amendments earlier. My right hon. and learned friend the Lord Chancellor set out our intentions on Second Reading in December. Although the provisions in the Bill at that time went some way towards achieving the intended result, the TUC did not think that we would achieve it and the Law Society had some reservations. We held discussions at length with both parties. Sadly, that took longer than we might have hoped. The time that it takes to get to where we want to get to is one of the most dispiriting things about Government. I apologise to hon. Members if they have not had as long to peruse the amendments as they might have liked.

Jonathan Djanogly: Will the Minister give way?

Bridget Prentice: Let me finish the apology, then I shall give way. We were right to take the additional time to ensure that we got things right.

Jonathan Djanogly: Let us accept that the Government needed additional time; why could not members of the Committee and, indeed, hon. Members generally have been advised of what was going on? Will the Minister also explain why she did not publish any details of the consultation to give us some idea of where the Government were coming from before the Committee started? Has she discussed the matter with consumer bodies?

Bridget Prentice: On reflection, perhaps it would not have been unreasonable to inform the Front Benchers of our position on some of the issues. I could not inform every member of the Committee, because I did not know who would serve on it. Brilliant as I might be, even I could not see whom the Committee of Selection was going to put on this Committee. There was not a lot of scope for me to move forward on that matter.
The hon. Members for Enfield, Southgate and for North Southwark and Bermondsey asked why the exception did not apply to other bodies. Other bodies might well be able to take advantage of a similar exception; it could happen, for example, in the case of the Police Federation that we discussed.

Tobias Ellwood: The Minister has glossed over an important point. She rightly said that she was not aware of who would serve on the Committee, but she is certainly aware of who sits on the Opposition Front Bench. It would have been appropriate for her to share the information when she had it. In addition, will she say whether she spoke to consumer bodies as well as to the TUC once the recommendations had been made?

Bridget Prentice: I have just said that it might have been appropriate to discuss the recommendationswith the Opposition Front-Bench spokespeople. The Department is good at involving Front-Bench spokespeople from the main Opposition parties in its thinking, as far as possible. The hon. Gentleman might have a point when he says that we could have had more discussions; but, frankly, the Department is not bad at those things.

Jonathan Djanogly: And consumer bodies?

Bridget Prentice: I should like to make my speech in my own way, if I may. I shall come to other consumer bodies. I have prepared a long speech about the issues that have been raised in the two sittings at which we have discussed the clause, and I shall come to consumer bodies in a moment.

Tobias Ellwood: I am grateful to the Minister for allowing me to intervene, and I apologise that we are interrupting her when she is trying to consolidate all the points that have been made. However, the very fact that she has a strong reputation of working so closely with the Opposition Front-Bench team has exposed the fact that the discussions with the TUC were not shared. The episode illustrates the good conduct with which the Minister normally carries out her duties and approaches such matters, but that has been absent this time.

Bridget Prentice: The hon. Gentleman can try to scratch at this to see whether he can draw blood; but, frankly, I do not think that he can. The Department had discussions with the TUC and the Law Society on the matter. In recent weeks, I had discussions with Opposition Front Benchers and talked through the measures proposed in the House of Lords that I wanted to change. My noble Friend Baroness Ashton also kept the Opposition up to date when she was taking the Bill through the House of Lords. We are where we are on such matters.
Other bodies will be able to take advantage of a similar exemption. If a body provides reserved legal activities only to its members, it will be exempt under clause 15. Clause 15(4) exempts bodies when the
“provision of...services to the public”
is not part of their business.
To answer the point made by the hon. Member for North Southwark and Bermondsey, we had to make specific reference to trade unions to address the specific issues that relate to them. For example, the legislation must make it clear that only independent trade unions may benefit from the changes. Independent trade unions had to be mentioned because of their specific legislative position, but it is possible for other membership organisations to be exempted. On the other hand, bodies such as the Co-op are much more likely to want to make their services available to the general public, in which case they will must go through the full regulatory system. Subsection (4) makes it clear that as long as
“services to the public”
are not part of an organisation’s “business”, it will not have to be authorised.
I shall come shortly to the points made by my hon. Friends the Members for Bassetlaw and for North Durham.

Simon Hughes: I want to be as clear as the Minister about the matter. Is she saying that she believes that the Bill will introduce a strict rule for members’ organisations—mutuals, co-ops or any of that family of organisations—by which they will not need to be regulated if they supply services only to their members, but if the organisations cross the line to put their services in the public domain, they will be regulated? I just want to be clear, so that we can all understand. I think that I understand, but I should be grateful to know that that is the clear line.

Bridget Prentice: That is exactly the position, which is why I fear that people have made more of the issue than necessary, but I must also make it absolutely clear that the individual lawyers employed in any such organisation must be regulated by their regulatory authority. In such cases, the Law Society would almost certainly be involved, but there may be others.
I shall move in a moment to the points made by my hon. Friends the Members for Bassetlaw and for North Durham. Did we consult anyone else? Yes. As I have said, we consulted TUC and the Law Society. We also held discussions with consumer groups, which understand the need to ensure that trade unions can provide member services with proper protections. We held discussions with Which?,the National Consumer Council, the Federation of Small Businesses, Citizens Advice and the Office of Fair Trading.

Jonathan Djanogly: Can the Minister make it clear whether those consultations were on the original Bill examined by the Committee, which had limited exemptions, or on the exemptions on which we will now be asked to vote?

Bridget Prentice: We discussed the principles behind the exemptions for trade unions—I have explained why trade unions are different from the other organisations mentioned—and the consumer panel, whose membership I have listed, was satisfied that they were appropriate. [ Interruption. ]

Frank Cook: Order. I have tolerated this for far too long, and now I must interrupt. There has been a constant chuntering between the number two on the Opposition Bench and the Opposition Whip. It is very audible, very annoying and very disturbing, and while it is going on, interventions are taking place. If the exchange must continue, please do it out of this room and out of my hearing.

Bridget Prentice: Thank you, Mr. Cook.
My hon. Friends the Members for Bassetlaw and for North Durham and, indeed, the hon. Member for Bromley and Chislehurst asked about control over membership following the miners’ compensation debacle. That is not really a matter for the Bill, but the Government’s amendments will create an exemption for services provided by virtue of membership. It will be primarily up to the trade unions themselves to decide who is a member and to whom they will make those services available. If they want to include associate members, they can, based on the decision whether they can afford to offer to more people services funded from union dues.

Bob Neill: Can the Minister help me with the point that I raised earlier? How will an associate member be defined? If it is to be left to the organisation to decide, surely associate membership must be defined for the regulatory framework to have any meaning. Concerns have been raised that the concept could be abused in certain circumstances. If we are to protect the consumer, there must be some protection by means of a definition.

Bridget Prentice: The definition will be in each trade union’s rulebook—it will be their definition of membership. I do not think that there will be a problem with associate members, because I do not think that trade unions will want to extend their union funds to cover a much wider group of people. Of course, they must also be careful not to put themselves into a position where they are seen to be offering services to the general public. Once they do that, they will lose exemption under clause 15.

Jonathan Djanogly: The Minister seems to overlook the fact that such things have happened. Unions have created associate members; the hon. Member for North Durham secured an adjournment debate on that exact issue. The Minister is burying her head in the sand.

Bridget Prentice: Let me remind the hon. Gentleman that we are talking about the services provided by the union, not by associated firms, as in the Vendside model.

John Mann: The Minister is digging a big hole for herself and the Government. The cases brought by Vendside were equally brought by the Union of Democratic Mineworkers in its own name. Is the Minister suggesting that the UDM will be able to have an exemption from regulation, using itself as the entity through which to do so? If she is, that will cause grave concern in all parts of the House.

Bridget Prentice: No. My hon. Friend makes an important point, and I am pleased to have the opportunity to clarify. No, the UDM will not be able to do that as an entity. The point about the exemptions is that the trade unions are not to be dealt with as entities, but are to be dealt with purely in the way that they deal with their own members. It is important to make that distinction.
I should also make it clear that if the Legal Services Board thinks that a union is abusing its exemption by making somebody a member—it can look at the definition of associate member in that respect—it will be able to take action. It will be able to work with the certification officer to find out who is on the union register, and if it thinks that the client is greater than that, it will be able to say that the union is working outside its exemption and will require it to be authorised. The way in which we have developed the measure should take care of my hon. Friend’s concerns.

Jonathan Djanogly: Is it fair to say that after thousands of associate members of unions have been ripped off, and after parliamentary debates and representations froma variety of groups and people on the matter, the Government are going to maintain that we should keep the status quo and that there should be no reaction whatever to the events that have taken place, let alone a move to our position?

Bridget Prentice: The hon. Gentleman is pushing his luck if he thinks that the Government do not take the same view as my hon. Friend the Member for Bassetlaw about the behaviour of one or two trade unions, which have behaved appallingly, as have some of the solicitors who have worked with them. We have always taken the view that my hon. Friend has expressed and we do not need to take lessons from the hon. Gentleman on the matter.

John Mann: I am afraid the Minister has been badly let down by her civil servants, who have given her the most appalling briefing. What she has said is not what the amendments say. The amendments do not categorise associate membership, so that is not what we are discussing. I invite her to reconsider her comments on associate membership, because the situation of both the Durham miners and the UDM is crystal clear. According to the Minister’s statement, the UDM would be allowed to have a category of associate member that would not be covered by the certification officer or by the Bill. That would be an appalling state of affairs. It is not the amendments that are the problem; it is the briefing that civil servants have written for the Minister.

Frank Cook: Order. It is not in order to make any reference to the civil servants attending the Minister in Public Bill Committee. It might therefore be desirable for the hon. Member to adjust his terms of reference in that regard.

John Mann: Thank you, Mr. Cook. I hold the Minister entirely and personally accountable and responsible. I offer her the opportunity to reflect on whether she should reconsider the issue of associate membership.

Bridget Prentice: I take full and absolute responsibility for what I say, which was that, if the Legal Services Board thought that a union was using the exemption by making people members who should not be members of that union, it could take action. It is up to the certification officer to decide whether to include associate members in a trade union, and the board would work closely with the certification officer on that.
 I will reflect on what my hon. Friend says in specific examples. I know of his campaign in his constituency to deal with the Durham National Union of Mineworkers, and I shall consider whether the provisions need to be tightened up further. At the moment, the amendments would give the board the authority to work in conjunction with the certification officer who regulates the trade unions, which is partly why the exemptions were in the Bill in the first place.

John Mann: My battle is not with the Durham NUM, but the UDM—a rather different entity. In that context, the certification officer has stated expressly in writing that he has no powers in relation to consumer complaints for associate members because he does not regard them as full members. The Minister is therefore in danger of creating inadvertently a category of associate members who are beyond the law.

Bridget Prentice: In that case, if the certification officer says that he has no way in which to define associate members in that context, I shall certainly look again at the issue.
I want to be clear. The vast majority of trade unions work properly and do an excellent job for their members. The exemption would give them the opportunity to continue to do that. In the case of rogues, we need to be able to deal with them. If we need to add a further measure to ensure that that is the case, I will be more than happy to do so. Like my hon. Friend, I do not believe that it is in our interests as the Government acting on behalf of the consumers, whether trade union members or others, to give leeway to anyone who will undermine the consumer interest in the Bill.
The hon. Member for Birmingham, Yardley asked the reasonable question whether we were dealing with a problem that does not exist. He was asking about the provision of legal services by trade unions. Generally speaking, that is a rare occurrence within union membership, but it happens from time to time. My hon. Friend the Member for North Durham cited the example of industrial injury cases. Work on those is reserved if they go to court.

John Hemming: I thank the Minister for answering the question in one respect, but what reserved legal services are provided under the status quo by trade unions? The example given by the hon. Member for Bassetlaw did not involve trade unions providing reserved legal services.

Bridget Prentice: Industrial injury cases are one example. Another might be the Musicians Union acting on issues such as copyright. Such services need to be carried out by a lawyer. It is in those instances that they are reserved legal services.

John Hemming: The Minister knows better than me which clause identifies all the reserved legal services. I accept that the conduct of litigation is a reserved legal service, but the offering of legal advice, and even the preparation of contracts, is not a reserved legal service.

Bridget Prentice: I have already given a couple of examples to the hon. Gentleman. I do not know how to make it any clearer what reserved legal services are. The point is that if a trade union attempts to provide a reserved legal service, the person doing that must be a lawyer who is regulated.

John Hemming: Where the Minister could make it clearer to me is by reference to clause 12(1). Under which letter from (a) to (f) do the unions offer reserved legal services?

Bridget Prentice: I have given a couple of examples, including the conduct of litigation, which are under 12(1) paragraphs (a) to (f). That ought to be sufficient for the moment.
 I want to move on to the point raised by my hon. Friend the Member for North Durham, who mentioned that many union lawyers do representation work at employment tribunals. Let me make it clear that that is not reserved legal work. Employment tribunals are not under the classification of a reserved activity. Also, it might be worth reminding the Committee that claims management is not going to be a reserved service, even though it has been regulated under the Compensation Act 2006.
My hon. Friend also asked me to confirm whether the lawyers and trade unions would be exempt under the amendments. Let me make it absolutely clear that they will not. Clause 15 covers the carrying out of reserved activities which always, in every instance, have to be carried out by entitled persons—that is, lawyers or people who are exempt as set out under schedule 3. Any lawyer providing services under this exemption will still need to be authorised and regulated by one of the approved regulators. The exception that we are discussing only takes the unions themselves as an entity out of the need to be authorised. That means that complaints about reserved services can be taken to the Office for Legal Complaints. To complete the point, if a union sends its members to outside firms, those firms and their lawyers will be regulated.
 There may have been some confusion about what an “employed lawyer” is. In clause 15 it means someone who is an employee of the union. If the union has an arrangement with an outside firm, which most of them tend to do, it may be said to be employing the firm’s services. However, that is not a contract of employment, as the hon. Member for Birmingham, Yardley pointed out. The firm’s client is the member, not the union. Perhaps it would be better to describe the firm as being engaged rather than employed.
 The hon. Member for Huntingdon made a number of points. He suggested that there were alternatives to the amendments. One was the creation by a union of a separate body to provide legal services with only lawyers working in it. That is perfectly possible. I wonder, however, whether it is really practicable. If we insisted on that, I suspect that some unions, particularly the smaller ones, might not be able to provide services and that would reduce their availability and the choice available to members.

Jonathan Djanogly: At the start of Second Reading and consistently throughout the Bill, the Minister has maintained that her primary objective is to act in the interests of consumers. Will she explain how her position in this regard is in the best interests of consumers?

Bridget Prentice: I said that although the hon. Gentleman’s suggestion may be possible, it is not practicable, partly because it may well reduce the choice available to consumers who happen to be trade union members if their union is not able to provide that separate service.
The hon. Gentleman’s alternative idea was to create an exemption for officials within unions. To be fair to him, we examined that possibility and originally we thought that that might be the solution. However, we concluded that it would not work, because the union would still need to be regulated as an entity. To exempt the union from having to comply with the applicable rules through the use of non-lawyers would probably open up loopholes and make regulation of the unions less effective. So the idea of an exemption was one that was worth looking at, but we decided that, on balance, it was not the best way forward.

John Hemming: The Minister cites the difficulty for smaller trade unions in setting up an ABS subsidiary. She believes that trade unions conduct litigation—that is, they sign documents on behalf of their clients—but the hon. Member for Bassetlaw has only cited examples where, even for the larger unions, the litigation is conducted by firms of solicitors. I would be quite surprised if the smaller unions conduct litigation in the strict sense of the word. I would be interested in hearing some examples of where smaller unions conduct litigation; not examples of where they pay for it to be done by lawyers, but examples of where they conduct litigation themselves by signing the court documents themselves.

Bridget Prentice: I cannot give the hon. Gentleman an example off the top of my head, but I will write to him, if that is acceptable.
I would like to return to the suggestions made by the hon. Member for Huntingdon. I think that his next point was that the certification officer was not a proper substitute for regulation through an approved regulator. I agree with him on that point; that is true. We have never pretended that a certification officer was a substitute for an approved regulator.
The certification office has a limited role. It cannot always take action in the way that an approved regulator could. None the less, if problems over the provision of services amount to a breach of the union’s rule book, that breach can be dealt with and taken to the certification office if necessary. Also, as hon. Members on both sides of the Committee have pointed out, union members obviously retain the option to go to court themselves.

John Mann: It would be helpful if the Minister could clarify and put on the record whether it is her expectation and that of the Government that the certification officer, in dealing with such issues, will act as robustly as she presumes that the regulatory bodies of the legal profession will act.

Bridget Prentice: I cannot speak for the certification officer; I would hope that they would deal with these issues robustly. I think that that is a debate that my hon. Friend needs to have with others, to determine whether the certification officer will act as robustly as he would like.
 I would like to return to the suggestions made by the hon. Member for Huntingdon. He gave us a hypothetical example of a union that behaves unscrupulously in providing litigation services to its members. It is true, in the hypothetical example that he gave, that the lawyers’ regulatory body would be able to take direct action only against the lawyers themselves, assuming that the lawyers had done something wrong. However, that regulatory body could also have an influence on the union. It could change its rules, so that lawyers are in effect prevented from working in that union, or it could even go so far as preventing them from working in unions in general. However, I must add a rider to that observation, which is that those new rules would have to be acceptable to the Legal Services Board.

Tobias Ellwood: Forgive me, Mr. Cook, but I am just coming to terms with this rather complex issue and I have a very simple question that I would like the Minister to answer on the record. Why is it that the unions have requested to be exempt from this Bill?

Bridget Prentice: I got up rather slowly to answer that question, because I thought that the whole thrust of the debate this morning was about why the unions needed to be exempt from this Bill. Fairly early on in my remarks, I said in response to the hon. Member for North Southwark and Bermondsey that we needed to address the issues that related specifically to trade unions. I also said that we needed to specify that the provisions apply only to independent trade unions. Hon. Members and trade unions themselves are concerned about trade unions that are not independent. That is why this part of the Bill has to legislate specifically for trade unions that have their own regulatory system. Other bodies that could equally apply for the exemption are covered under clause 15(4).

Tobias Ellwood: Why?

Bridget Prentice: I have just answered that. Trade unions need that exemption. We need to address the specific issues that apply to them. They are legislated for and regulated in another way, so we need to make it clear that we are referring specifically to independent trade unions in this part of the Bill. I do not think that I can make it much clearer than that.

Simon Hughes: Am I right in thinking that the only effect of the amendments tabled by the Minister willbe to change every reference to “trade union” to “independent trade union”? Will there be just that one category, as defined elsewhere?

Bridget Prentice: The Bill will refer to independent trade unions as defined in the trade union legislation.

Tobias Ellwood: I am testing the Minister’s patience. If I were to cut and paste her answer and show someone her reasons for the union exemption, which is the reason why individual union members are not able to receive the same protection from the operation of their union or with regard to legal support, they would find it highly questionable. We have not had a proper answer to why the unions are exempt from the clause.
I shall probe further and say that the vague area of associate membership has been highlighted by the hon. Member for Bassetlaw, a Labour Member. How do associate members receive the legal support that we are trying to provide in the Bill? They seem to be omitted from it; they do not receive the same protection. I am astonished that the Government, who are supposed to look after the interests of the unions, are bowing to the might of the union barons.

Bridget Prentice: If the hon. Gentleman were to cut and paste anything that suggested for one moment that trade union members will get a lesser service than other consumers under the Bill, he would be very wrong indeed. As the hon. Member for Huntingdon constantly reminds me, because I constantly say it, the Bill is about putting the consumer at the heart of the legal system. That applies to trade union members as much as to consumers in any other forums.
I am talking about trade unions as an entity. Their members will be protected as much as anyone else. Lawyers working within trade unions will be as regulated as any others. I assure the hon. Member for Bournemouth, East that trade union members will get a standard of service that is as good as the standard that I want for every consumer. The TUC has made it clear that it wants to ensure that the services that it provides for its members are of the highest standard. We will ensure that that is the case, and he need not cut and paste anything other than that.

Henry Bellingham: The Minister says that the trade union movement is keen for members to get the best possible protection. Furthermore, it is obviously anxious to be seen to offer the highest possible standards. Why, then, did the trade unions not lobby to keep the Bill as it is rather than pushing for exemption?

Bridget Prentice: For the umpteenth time, we need to make a clear exemption for trade unions because of the specific issues that apply to them. In all other respects, the exemption under subsection (4) will be the same, but because of the particular position of trade unions, and because we need to define their independence, we need to make an exemption.
 The hon. Member for Huntingdon said that, if the rules were changed, it should be proportionate and consistent. The regulator could complain to the certification office, which, as my hon. Friend the Member for Bassetlaw said, could take limited action. A related question was whether the Office for Legal Complaints would be able to get information out of the trade union in order to deal with a complaint. Formally, the OLC will have powers of compulsion only over the parties to the complaint; in the example given by the hon. Gentleman it would be the member and the lawyer.
The lawyer might claim that the information was in the union’s hands, but if the OLC considered it to be a ploy to get out of providing the information it could take action against the lawyer. However, if the claim were genuine, the OLC would have to ask the union to co-operate. If the union refused to co-operate, the OLC would not be able to enforce its request, but it would be able to tell the relevant approved regulator, which could decide to make the rule change that I have described.
I hope that the hon. Gentleman accepts that I agree with the Solicitors Regulation Authority. If the regulators conclude that union lawyers should work only through regulated entities, and if the board agrees that that is proportionate, that is what will happen. The unions will then be able to use the provisions of part 5. I hope that it will not be necessary, but the provisions are in the Bill should they be required.
On the question of coal health claims, it was clearly a disgraceful episode for the trade union movement. However, it does not mean that all unions are not to be trusted in all circumstances. The Government must ensure a good balance, dealing with those that behave badly but without condemning the majority in the process. The amendments allow the majority of decent unions to continue to work in the interests of their members, but retain the protection of being able to take action if problems arise.
After a full debate on the amendments, I hope that the Committee will agree to them.

Question put, That the amendment be made:—

The Committee divided: Ayes 11, Noes 5.

Question accordingly agreed to.

Amendment proposed: No. 109, in clause 15, page 7, line 16, after ‘(6)’, insert ‘Subject to that,’.—[Bridget Prentice.]

Question put, That the amendment be made:—

The Committee divided: Ayes 11, Noes 5.

Question accordingly agreed to.

Motion made, and Question put, That the clause, as amended, stand part of the Bill:—

The Committee divided: Ayes 11, Noes 5.

Question accordingly agreed to.

Clause 15, as amended, ordered to stand part of the Bill.

Clause 16

Offence to carry on reserved legal activity through person not entitled

Question proposed, That the clause stand part of the Bill.

Simon Hughes: I have chosen to make the point now, rather than on the previous clause. Clause 16, like clause 15, is drafted, as has increasingly frequently been the case in recent years, using letters for a category, once it has been defined. That is fine; among other things it makes the text shorter. It reminds me of questions in law exams that are put in terms such as, “If A does this, then B does that, describe the relationship between A and B in law.” Has the Minister’s Department taken the innovative approach to this Bill that it has taken to some of its draft legislation, including the draft coroners bill, which it has proof-read for readability by common women and common men? I am keen—it is a recurrent theme with me—that we should take that approach, because the more complex the subject, the more important it is to ensure that the Bill is readable. I ask the question now, because this is the obvious point at which to ask it. Has this Bill been subjected to that sort of process?

Bridget Prentice: No, not yet. I will take the matter forward. Like the hon. Gentleman, I am keen that wording should be as close to plain English as is humanly possible. The measure has not yet been subjected to that particular scrutiny.

Simon Hughes: I thought that that was probably the answer. Can I make a plea that, as soon as we can, we make a point of having regular plain English readability checks? During the passage of the Bill, we are going to go on to talk about consumer panels. Logically, somebody other than us should look at draft legislation, because we see measures like this all the time and might become immune to them. My plea is that the Ministry of Justice, in its present life and its life after next Wednesday, view that as a high priority.

Bridget Prentice: I will certainly put that forward.

Question put and agreed to.

Clause 16 ordered to stand part of the Bill.

Clause 17

Offence to pretend to be entitled

Simon Hughes: I beg to move amendment No. 269, in clause 17, page 8, line 22, at end insert—
‘(4) All persons claiming to be entitled to carry on any activity which is a reserved legal activity shall have a duty to make clearly known to each client, at the beginning of their dealings with each other—
(a) their professional title and qualifications; and
(b) the most senior member of the firm to whom they are accountable.’.
As the Minister knows, I have trailed this amendment; it complements the clause that we are about to debate. It is a good clause in that it makes it clear that somebody who holds himself out as being entitled to act as a solicitor, even though he is not, is committing a criminal offence. If we are to have a reputable set of professions, it is important that we do not let people get away with pretending to be something that they are not. Although such cases might not be as publicly odious as those of the people whom we occasionally discover practising as doctors, gynaecologists and others when they are not, this is an important matter. People could be badly misled and lose a huge amount of money if they took legal advice from somebody who was incompetent and unqualified to give it.
The amendment is designed to make it a bit clearer to consumers who they will be dealing with when they go into the world of dealing with lawyers, who are the people regulated by the clause. It is therefore self-explanatory, although I do not pretend that it is perfectly drafted. I am keen that the Minister should be sympathetic to it and, in her usual considered way, take it away and think about how we might achieve that objective. I say that not because I have a theoretical obsession about the issue, but because I know that it is a matter of practical concern.
I know that some, if not many, people will have come to you, Mr. Cook, in your surgery or elsewhere, saying that they have been to see a solicitor or similar, yet when you have looked at their papers you have discovered that they have had no dealings or communication with anybody who is legally qualified. All the people with whom they have dealt have had lesser, or even no, qualifications; some might have been students or new trainees. I do not disparage the work that such people do, but I am keen that people should know with whom they are dealing.
 There are examples of good practice and good conduct, and of solicitors who give good advice. However, we are not considering good solicitors. A reputable, long-standing south London firm with which I have dealt, as have my constituents and those who represent them, is Anthony Gold. It is committed to good legal work and community support. It has taken on new areas of work such as housing law and the cases of people who want to take their local authority to court, as well as personal injury and such things. It has a very good reputation. If one  goes to see it, one is contacted in writing when one’s engagement with it is confirmed. The person writing explains his role within the firm, names the principal to whom he is accountable and says what to do if one has a complaint. That is good practice and it is done by most firms. It should be done by all firms.
However, I can think of an immigration case that went badly wrong when one of my constituents went to a small firm and dealt with somebody whom he believed to be a qualified lawyer with competence in immigration and asylum matters. The person was not a qualified lawyer and, as I discovered when I inherited the case, had no competence. The Government rightly introduced a new system for regulating people who give immigration advice, which was welcome. An agency was set up to deal with it. I am sure the Minister understands my general point—we are trying to ensure that there is some onus.
It may be that the matter would be better governed by requiring the professional bodies, to which we will come in a minute, to place a duty on all the people who work for them. However, some people slip through the net by not belonging to any of those professional bodies. To take a ridiculous example, somebody who works for a very reputable firm—or a less reputable one—without being legally qualified in any way is the cleaner. It is ridiculous but it is not impossible that one day, a rush of blood might go to the head, somebody might come through the door and the cleaner, the last one left in the office, might decide to try their hand in giving legal advice. If they are creditable, who knows? The person might well leave thinking that they have been given good advice.
I can think of one example of somebody—I defended him many years ago—who was wonderful at persuading people that he was who he said he was. He went around to lots of establishments in London pretending that he came from the environmental health department. He was very good at lying. He would go to inspect a kebab shop or a Chinese takeaway, and on every occasion he would find a dead mouse or rat. That was not surprising, as he had just it put it there. Then, of course, he charged rather a large sum not to report it. He lived comfortably for a long time, commuting regularly every week from his family in Scotland to his job in London. [Interruption.]He was English; let me not malign the Scots. He had a girlfriend and a child in Scotland, so he would fly up on a Friday, fly down on a Monday and do the job.

Henry Bellingham: And he was a Liberal Democrat.

Simon Hughes: Not to my knowledge, although one hopes that everybody is capable of redemption, including in their voting habits. Eventually he got caught when he went to the same kebab shop twice and they recognised him coming around for the second time.
I exaggerate. It is a funny story, but it is a true story; it happened. There are serious concerns. I am keen that the Minister should tell us how she envisages that they will be addressed. They must be addressed, because some are still misled in the world of legal advice by people who they think are qualified and competent professionals when they are not.

David Burrowes: I welcome the intention behind the amendment. A couple of weeks ago, a constituent was in my surgery who had been the victim of a gentleman who presented himself as offering a legal service, when the advice in his letter was not worth the paper that it was written on. The constituent was frustrated in trying to seek some redress for her undermined claims. When she went to the police, they did not know what to do. Other clauses and regulations will hopefully deal with the matter in more detail, and we support that.
 I welcome the general concern for client care. Client care and the code of conduct are a natural part of the day for every solicitor who gives advice. It is a natural part of the first letter to the client—those who are cynical might say as natural as asking for money on account. It is always there, without people thinking twice about it. It is also the case—it is particularly important when considering the clause’s merits—that such matters are explicit in the solicitors’ code of conduct. The code of conduct provides strict regulation in rule 2 about taking on clients. It is ingrained in the lives of every solicitor and designed to help both solicitors and clients to understand properly each other’s expectations and responsibilities, and explicitly to ensure that clients are given the information necessary to make appropriate decisions about whether and how they might wish to proceed.
Rule 2.02 of the code of conduct—it is worth putting it on record to see whether the situation merits such a clause—says explicitly:
“You must, both at the outset and, as necessary, during the course of the matter:
(a) agree an appropriate level of service;
(b) explain your responsibilities;
(c) explain the client’s responsibilities;
(d) ensure that the client is given, in writing, the name and status of the person dealing with the matter and the name of the person responsible for its overall supervision; and
(e) explain any limitations or conditions resulting from your relationship with a third party (for example a funder, fee sharer or introducer) which affect the steps you can take on the client’s behalf.”
The question is whether that needs to be explicit in the Bill. Given that the Bill seeks to extend the provision of legal services and to widen ownership, there is merit in careful consideration. My view, and that of my hon. Friends, is that we should avoid over-legislating and that such matters should be left to the regulators. However, if one were to include that in the Bill, one would have to question whether it should be limited to the two aspects contained within the clause and not incorporate all the elements within rule 2.02 on client care, which has served many solicitors well.

John Mann: I am not sure whether the amendment does what it intends to do. It is a probing amendment. If someone claims to be entitled to carry on a reserved legal activity, they could be claiming something which, in some of the examples, they should not be able to claim at all. There are two angles on which I would be interested to hear the Minister’s comments. The first concerns a solicitor who pretends to be the authorised solicitor of a trade union but is not. In the case of AMS Law and the miners compensation scheme, AMS Law added a UDM claims handling unit logo to the solicitor’s headed paper. In other words, it falsely gave the impression that it was a trade union’s in-house claims handling unit. Is such an example covered by the  clause? If so, who should regulate against that kind of pretence, which misleads the consumer? AMS Law misled a lot of people in my area and elsewhere.
My second angle uses another example of the miners compensation scheme. My constituents believed that a number of people were solicitors when they were not. I cite the example of Mr. Stuart Bell of Stuart Bell Associates of Worksop. Mr. Bell was not a solicitor and never had been a solicitor. He was allowed to represent individual miners and present cases to the Department of Trade and Industry, because he was acting under a High Court ruling which stated that everyone had the legal right to the equivalent of their day in court. Who should be responsible for dealing with that abuse? People could not seek a remedy from the Law Society because Mr. Bell is not a solicitor—they had to go to the civil courts. I suggest that Mr. Stuart Bell of Worksop is not the only example of someone who has taken on a claim as if they were a solicitor. Certainly all my constituents assumed that Mr. Bell was a solicitor. Should the responsibility of investigating, both under present measures and under the Bill, go to the legal profession and its regulatory bodies? I think that that would be a good opportunity for the legal profession to defend itself against those who purport, by illusion if not explicitly, to be part of that profession and leave the consumer with the invidious proposition of having to go to a solicitor in order to take legal action against a non-solicitor whom they presumed was a solicitor.

John Hemming: The hon. Member for Bassetlaw raises another interesting point. If someone is not conducting litigation but merely advising somebody and acting in their own person, that is not a reserved legal activity, so it would not fall under the Bill. Although this is a probing amendment, it is important because the client needs to know at the start of the process whom they are dealing with and under what circumstances. I urge the Minister to consider whether we should confirm more precisely that somebody is regulated by the Legal Services Board, whether they are part of an alternative business structure or of a different organisation, and that they fall inside a particular regulated line.
Another relevant issue is the factors that need to be considered on engagement. I accept that a client engagement letter refers to the rates, how much things might cost and so on. That is important, but should not certain things be included in the Bill? Obviously, I concur with my hon. Friend the Member for North Southwark and Bermondsey on such matters. In public family law, in particular, it is common practice for a firm of solicitors to work for both the local authority and the parents. It is not working on the same case, but one day, it works for the parents; the next day, it works for the local authority, and, the day after that, it works for the parents. I am not sure whether that is proper practice, although the Law Society says that it is.
 Let us suppose, however, that the clients go to a firm of solicitors expecting it to fight their corner. Having lost their new-born baby, they find out in retrospect that the firm also works for the local authority. The clients should have been told before they started using the firm that it had two masters: themselves and the local authority. Whether that provision should be put into statute is an interesting question. We have referred to conflicts of interest. We cannot ignore them, however inconvenient they are. The Law Society’s argument is that it would be difficult to find people without conflicts of interest to undertake such work. That is probably not the way in which we should approach matters, so I urge the Minister to consider the problem.

Bridget Prentice: I agree absolutely that transparency is the key to maintaining consumer confidence. When consumers engage a firm of solicitors, they should expect the best advice that the firm can provide for the price that it charges. If they then find that the advice comes from someone else—hopefully, not the cleaner—that might undermine their confidence in it, and not surprisingly so. That does not necessarily mean that the advice is wrong; some firms of solicitors are staffed by a variety of qualified lawyers, some of whom will be “authorised persons”, using the Bill’s language, while some will not be solicitors, but will be authorised for other reasons, and will include legal executives, barristers and conveyancers. I do not want anyone to be under the impression that a particular authorised person is somehow second best; it is just who is appropriate in the circumstances.
 It is possible, too, that non-authorised persons may provide reserved legal services direct to clients, but only under the supervision of authorised persons who still remain responsible for the provision of the service. Having said that, there is a lot of merit in the amendment tabled by the hon. Member for North Southwark and Bermondsey. I take on board what was said by the hon. Member for Enfield, Southgate and I want to explain why I shall take the amendment away and consider it. It is clearly in the consumer’s interest to be informed of the way in which their case is handled. Not only is that helpful to them, but it lets them know where they stand and what their rights are, all of which the Bill is supposed to be about. It is important, too, that the Bill makes it clear to the consumer what that particular solicitor or legal adviser can or cannot do so that there is less scope for misunderstanding.
 However, there are a couple of small gaps in the amendment, the first of which concerns enforcement. It would be best to provide for that subject as part of the duty in the regulatory arrangements. As the hon. Member for Enfield, Southgate said, the codes of conduct already include something along those lines. We may want to consider redrafting the amendment so that the primary duty lies with the regulator rather than the individual adviser. In that way, the regulated people would have to comply with the duty and action could be taken if they did not do so. Secondly—although a minor point—the duty might not arise in full in all circumstances. Barristers in independent practice, for example, all have the same level of qualification. They are also practitioners, and not accountable to anyone in that sense, so we would have to consider how their code of conduct would apply in that situation.
Finally, an important feature is missing. Although the consumer could know the body to whom the adviser is accountable, the amendment does not go far enough because it does not say to whom the consumer can complain or what the complaints process is. Many codes of conduct contain a complaints procedure, so we need to take that into account, too. I am happy to consider the amendment, but I urge the hon. Member for North Southwark and Bermondsey to withdraw it so that we can consider how we will incorporate it, taking into account all the points that have been raised.

Simon Hughes: I am grateful for the contributions of my hon. Friend the Member for Birmingham, Yardley and of the hon. Members for Enfield, Southgate and for Bassetlaw, and for the Minister’s response. There is a problem, and the amendment was a first stab at trying to address it. I do not want to be over-prescriptive or over-regulatory—that was never my intention—but I am happy to seek to withdraw the amendment and work with the Minister and her officials to get it to fit comfortably in the Bill, the codes and other things. Some people never get beyond the first encounter, and the amendment is intended to deal with circumstances in which the outcome of someone’s relationship with a firm is decided by the person with whom they deal. The position of that person, their authority and their confidence entirely determine that relationship.
If people do not know whom they are dealing with and do not understand their background or skill, or if they understand it wrongly or are misled, that will entirely influence how they decide to proceed. For example, let us take the case cited by my hon. Friend the Member for Birmingham, Yardley. In family law cases that deal with difficult issues, a person might eventually summon the courage to take legal advice on how to take action to protect the interests of their child in a disputed case in which there are allegations of abuse or something similar. They see someone and come away thinking that they have received authoritative advice, when in fact the advice was provided by someone who had been there a week. That is the sort of thing that we need to ensure that people are clear about, and that is the nature of my concern. I am grateful for the Minister’s response, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 17 ordered to stand part of the Bill.

Clause 18

Authorised persons

Jonathan Djanogly: I beg to move amendment No. 256, in clause 18, page 8, line 32, at end insert—
‘(c) A body, which is not a licensable body, but which carries on a relevant activity by virtue of Section [Registration of non-authorised managers]’.

Frank Cook: With this it will be convenient to discuss the following amendments:
No. 257, in clause 72, page 41, line 10, leave out subsection (1) and insert—
‘(1) For the purposes of this Act, a body is a “licensable body” if—
(a) at least one manager of the body is an individual who is a non-authorised person who provides services directly or indirectly to clients; or
(b) more than 25 per cent. of the managers of the bodyare individuals who are not authorised persons regardless of whether they provide services directly or indirectly to clients; or
(c) at least one person who has an interest in shares in the body is a non-authorised person and is not a manager of that body.’.
No. 268, in clause 71, page 41, line 8, at end insert— 
‘, provided that a body is not a “licensable body” if the only managers who are non-authorised persons are individuals who do not directly provide any services to consumers.’.
No. 259, in clause 72, page 41, line 13, at end insert—
‘(1A) A body is not a licensable body if it is regulated under section 9(A) of the Administration of Justice Act 1985.’.
No. 260, in schedule 16, page 264, line 35, leave out paragraphs (a) and (b) and insert—
‘at least three-quarters of the partners are authorised persons or are registered foreign lawyers, and any other partners do not directly provide services to clients.’.
No. 261, in schedule 16, page 264, line 43, leave out paragraphs (a) and (b) and insert—
‘at least three-quarters of the members of the body are authorised persons or are registered foreign lawyers, and any other members do not directly provide services to clients.’.
No. 262, in schedule 16, page 265, line 6, leave out paragraphs (a) and (b) and insert—
‘at least three-quarters of the persons within subsection (5) are authorised persons or are registered foreign lawyers, and any other members do not directly provide services to clients.’.
New clause 14—Registration of non-authorised managers—
‘(1) Any body “B” which carries on an activity underSection 13 of this Act, which is not a “licensable body” as defined in Section [71(1)] but which has at least one manager who is not an authorised person, must register any non-authorised manager with an approved regulator.
(2) It is an offence for B to carry on an activity underSection 13 of this Act if B does not comply with the conditions of this section.
(3) For the purposes of this section an approved regulator may refuse to register any non-authorised manager (M) of B if its is not satisfied that:
(a) M does not provide services to clients, directly or indirectly, or
(b) M will act in a manner consistent with the “professional principles” set out in Section 1(3).
(4) No manager of B may be a person who has been disqualified from acting under Section 99.
(5) B will cease to be entitled to carry on an activity under Section 13 of this Act if B knowingly carries on reserved activities whilst a person, disqualified under Section 99, continues to be a manager of B.’.

Jonathan Djanogly: Certain amendments in this group have been proposed by the Institute of Chartered Accountants in England and Wales and, because we are dealing with business organisations, I want to declare that I am a member of the corporate finance faculty of the ICAEW as a qualified corporate financier, although I am neither an accountant nor a member of the full institute. The amendments cover legal disciplinary partnerships and legal practice plus, and tie in closely with part 5, which deals with alternative business structures. I should say at the outset that amendment No. 256 should refer to “individuals who are authorised persons” rather than “authorised persons” and I apologise for any resulting confusion.
The amendments have been tabled on a probing basis, not least because many of them cover the same point in a slightly different way, although the principle is the same. Amendment No. 256 is required as a consequence of new clause 14, which was suggested to us by the ICAEW. The new clause enables
“practices to have 25 per cent. or less on a head count of managers who are not lawyers and who are not providing services to clients (so called Legal Practice Plus.)”
It would become operational on enactment alongside other forms of legal disciplinary partnerships, which are partnerships between different types of lawyers.
I have received a lot of feedback on the issue from the commercial law and accounting practitioners, and I am aware of a huge gap in expectations that needs to be filled. We need to address the issue of non-executive directors and other employees such as accountants, economists and tax advisers and those who deal with administration and back-up in servicing clients. For those people, the current system is unrealistic. They may come from merchant banks in the City, where they are among some of the highest earners, yet they are effectively second-class citizens in law practices because they cannot take part in the ownership of the firm.
Today, law firms realise the benefits of bringing skilled outsiders into their organisations. There was an interesting account earlier this month in an edition of the Law SocietyGazette. A non-lawyer, William Arthur, former director of professional practices at Barclays bank, was recruited as a non-executive director by a Kent firm, Cripps Harries Hall. His brief was comprehensive and demanding—to use his 30 years of top-end commercial experience to steer his firm through the challenges facing the legal profession today. Mr. Arthur observed:
“Law firms are getting bigger and bigger and are not small businesses anymore. The market place is changing rapidly and they need to apply the best business principles to everything they do. Many firms are acknowledging that while they have exceptional professional skills, they don’t always have the full suite of business skills and experience to bring them to the front of the field”.
 Law firms have employed non-lawyers in senior roles, such as directors of IT or human resources, for many years. The appointment of non-executive directors is a relatively new phenomenon, but one that should be encouraged. We should assist that process, and ensure that people in senior positions within law firms are not stigmatised or penalised merely because they are not qualified lawyers. As I have shown, they are often people of great experience with good skill sets, and are an asset to law firms. The question is how those good intentions are to be translated into the Bill. I accept that it is not a straightforward issue.
 Amendment No. 268, which deals with the licensing of alternative business structures, was suggested by the City of London Law Society. The amendment would ensure that a law firm, or a limited liability partnership, would not become an alternative business structure solely because it wished to appoint as managers non-lawyer professionals. It is already clear that that is no longer a rare phenomenon, but an increasing occurrence. The amendment would apply if those appointees provided only internal services to their firms and did not directly provide services to clients of the firm.
Amendment No. 257, which was suggested by the Institute of Chartered Accountants, would have a similar effect to that of amendment No. 268, from which it is clear that accountants and lawyers are moving in the same direction.
On Report in the other place, Lord Hunt returned to concerns expressed in Committee and tabled a similar amendment designed to enable legal disciplinary practices to exist without having to be licensed if three quarters of the partners were lawyers and there was no external ownership. He envisaged that the Law Society would need a power to establish a register of permitted non-lawyer partner-managers of firms and to set requirements for eligibility to register.
 Baroness Ashton resisted the amendment, saying that the Government wished, as far as possible, to create a level playing field between regulators, offering all the potential to become licensing authorities. She would not want to give one regulator a potential competitive advantage, first, by virtue of reaching part of the alternative business structure market before other regulators and, secondly, by avoiding the additional statutory requirements that would otherwise apply to such practices. She went on to say that if a body had non-lawyers in positions of control it would be a licensable body. The framework is already provided for low-risk bodies but the Government have set the maximum limit for non-lawyer ownership at 10 per cent., and anything above that would need full scrutiny. The amendment was withdrawn.
Looking at the matter now, I have to say that Baroness Ashton’s position was somewhat regressive, and failed to understand how legal firms work now, let alone how we should enable them to adapt and continue to compete and excel in a competitive national and international marketplace. That is the view of most people, including the Law Society and the Conservative party.
Yesterday, I received a joint statement on the Bill from the Institute of Chartered Accountants, the Chartered Institute of Patent Attorneys, the Institute of Trade Mark Attorneys and the Royal Institution of Chartered Surveyors. I will not quote it all, but in particular it states:
“There should be immediate introduction of Clementi’s definition of Legal Disciplinary Practices with minority non-client facing, non-lawyer managers, helping enhance the service to consumers. This would enable earlier, effective regulatory oversight of arrangements already in place in all but name.”
The fact that non-legally qualified people who play a significant part in the running of a legal practice cannot be a partner without invoking the licensing provisions is a problem.

Stephen Hesford: With respect to that point and that made by Lord Hunt of Wirral in the other place, I find myself agreeing with Baroness Ashton. The measures in new clause 14 and amendment No. 256 would be bureaucratic; they would set up a new system—the so-called register. It would lack transparency, which would drive a coach and horses through one of the aims of the Bill—to bring in new competition and promote consumer understanding of the legal services and entities with which they deal.

Jonathan Djanogly: I disagree. I would say that the proposed measures would recognise and put into the regulatory structure a system that, in effect, already exists. That is important.
 We feel that it is wrong to lump non-legally qualified people with other entities by putting them on the slow-track ABS timetable. The hon. Member for Wirral, West mentioned that confusing issue. In some ways, the proposed measures would make matters more straightforward, because they would put such entities in the same position as lawyers who join together, which is recognised in the Bill. They would differentiate low and high-risk entities, as it were, which should then be considered in relation to the slower-track provisions in part 5. The proposals would remove the cumbersomeness that attaches to this part of the Bill and unnecessary red tape.
The key protection issue is that people’s access to justice is not attacked, and that ABSs are not able to cherry-pick services to the detriment of the overall position of consumer legal services. We should debate that when we come to part 5. At the moment, we are concerned about lawyers not losing out, compared with other professions, with regard to their ability to run their practices better for the benefit of consumers.
There is a fundamental issue, which has suddenly been given more prominence in relation to ABSs and LDPs. The issue is whether legal disciplinary partnerships that do not have external ownership will be enabled to operate sooner than 2011, which is the likely date if they are allowed to operate only under the ABS regime. The Government’s planning indicates that it is unlikely that the LSB will be fully functioning before 2010. Other regulators, including the Council for Licensed Conveyancers, may already regulate LDPs that include non-lawyers. The Law Society strongly supports permitting solicitor-led LDPs to operate under its mainstream regulatory regime before that time. Some minor enhancements may be needed to the Law Society’s regime to ensure that the SRA will have the necessary powers to regulate non-lawyer partners, but there should be no great difficulty. Indeed, the provisions of schedule 16 may already be sufficient.
The Law Society has pressed the Government for additions to its regulatory powers for some years. The council decided some years ago that in principle solicitors should be able to provide services to the public through any regulated entity, subject to ensuring the necessary consumer protection. The board worked up the issues further and concluded that it would be sensible to create what the Law Society subsequently called “Legal practice plus”, under which non-lawyers would be enabled to become partners in a solicitors firm, as long as it did not provide services normally forbidden to solicitors firms, such as audit services, nor would they be able to have external ownership.
That proposal foundered on the Law Society’s inability to regulate non-solicitor partners. It had hoped to do so on a contractual basis, but leading counsel advised that that was impermissible. Accordingly, the society asked the Government for additional regulatory powers to enable it to establish a register of permitted non-solicitor partners and to exercise all of the regulatory powers that apply to solicitors. The Department for Constitutional Affairs was sympathetic to that, but no suitable legislative opportunity arose until the Bill.
 When the Bill was introduced, many people were therefore disappointed to discover that the Government intended that the only LDPs that could be regulated outside the ABS regime were those consisting solely of partnerships between different types of lawyers. That seemed to many, including the Law Society and the ICA, to provide an unnecessary barrier to establishing what Sir David Clementi called LDPs and the Law Society called Legal Practice Plus.
 It would seem that the Government’s cautious attitude arose in part from the belief that a more liberal approach would encounter substantial difficulties in the House of Lords. The Conservatives thought that that concern was misplaced. We knew that the other place would be concerned about external ownership of law firms, and we and our noble Friends were and are concerned with ABS implications for access to justice, to which we shall come in part 5, but we did not think that the House of Lords would have such major concerns about the proposition that a minority of non-lawyers should be partners in a firm in order more effectively to provide a range of services to clients. Lord Kingsland and Lord Hunt both spoke in support of amendments to that effect, but the Government—surprisingly, given their pro-consumer stance—resisted them.
It is important to emphasise that such firms providing reserved legal services will continue to need regulation by a legal regulator. Indeed, the Council for Licensed Conveyancers can already regulate firms with non-lawyer partners, as can some smaller bodies such as the Institute of Trademark Attorneys and the Chartered Institute of Patent Agents. But significant public and consumer benefit would arise from the Law Society having such powers so that the SRA could regulate them.
The amendments suggested by the Law Society for Commons Committee, which we tabled as amendments Nos. 259 and 262, were weaker than it would have liked. They would enable the Law Society to regulate partnerships and other incorporated bodies under its ordinary regulatory regime and corporate bodies under its existing regulatory regime—that is, not as ABSs, and thus much sooner—where they have a minority of non-lawyer partners. Amendment No. 259 would exclude such bodies from the ABS regime. It is needed because of the Government’s approach whereby anything that could be an ABS must be.
The amendments would enable non-lawyers to become partners only so long as they are not client-facing. That would meet the main concern of City firms that wish to be able to make senior support professionals partners, but it would not enable a high street firm, for example, to go into partnership with an accountant and to provide tax advice primarily through that accountant.
 The Law Society suggested a more limited approach because it had got nowhere with broader amendments in the House of Lords and wanted to see whether it could make at least some progress, albeit more limited than it would have liked. It would much prefer non-lawyers to be allowed as partners even if they provide services directly to clients, and that view reflects the Conservative party’s position. The Law Society would be happy if there were a simple majority of lawyers, but the ICA would go even further. We can discuss its point of view later in part 5, when we come to multidisciplinary practice.
I shall comment on the other amendments grouped with those suggested by the Law Society. We simply want to enable the SRA to regulate LDPs that are not externally owned as soon as possible after Royal Assent rather than in three or four years, and to ensure that the full range of public and consumer protections are available in respect of all practices providing reserved legal services.
The ICA-inspired amendments Nos. 256 to 258 and new clause 14 are supplementary to amendments Nos. 259 to 262. They have the benefit of generalising the provision rather than making it applicable only to the Law Society. We still need amendments Nos. 260 to 262 as well, because without them the Law Society would have no power to regulate such a body.
Commenting on ICA new clause 14, the Law Society said that it would also be concerned if it thought that the only bases on which non-lawyer managers could be refused registration were those set out in paragraphs 3 and 4. It would expect the SRA or any other regulator to wish to ensure that any non-lawyer managers were fit and proper persons, and particularly that they did not have any convictions for dishonesty. In the case of non-lawyers from some other professions, such as accountancy, that could be done fairly readily, since the other professional body has requirements similar to those of the SRA. The non-law regulator would need only to certify that the member concerned was of good standing. That would not necessarily apply to all possible non-lawyer partners, however; it is important that legal regulators would be able to impose the appropriate requirements.
It might also be appropriate for the legal regulators to require any non-lawyer partners or managers to demonstrate understanding of the rules concerning the way in which legal services must be provided—what would be described as the conduct of business rules in other contexts. The Law Society would be anxious to ensure that new clause 14 did not inadvertently limit a proof-regulated entitlement and duty, to ensure that people holding senior positions in law firms were personally suitable to do so.
This is a complex matter, but I hope that, through my explanation of the amendments, the Minister can see where we are coming from, as we do not feel that the Bill addresses the issue correctly. I hope that the Minister will take a positive approach.

John Hemming: We generally support the principle of the amendments. Most legal firms of any size have one or two senior managers to do the accounts and manage the staff, infrastructure, computers and so on. Under the amendments, those managers would be regulated by the Law Society, so that they could be made a partner and have a cut of the profits, which would be entirely reasonable. That would not undermine the interests of the consumer, and it would achieve the sort of balance that exists in many other organisations. From that point of view, the Government should accept the general principle of the amendments, if not their detailed nuances, given that they are probing amendments.

Bridget Prentice: The amendments are designed to take certain practices outside the scope of the ABS regime in part 5 of the Bill. They are familiar, because they are similar to those that were debated in another place. To the hon. Members for Birmingham, Yardley and for Huntingdon, I must say that I sympathise with some of the objectives of the amendments, but I think that they would create some difficulties.
Amendments Nos. 259 to 262 would exclude from part 5 any practice regulated by the Law Society in which at least three quarters of the owners and managers are authorised persons. I am a wee bit disappointed that the Law Society is still unconvinced by the arguments that were made in the other place, because our objections remain the same.
 There are problems with an amendment that seeks to depart, in various respects, from the stated objective with regard to ABS. It would allow firms with significant non-lawyer management and ownership to operate without the oversight of the board or any of the guaranteed safeguards provided by part 5. It would allow firms to be partially managed and owned by non-lawyers, with no provision for a head of legal practice or a head of finance and administration, or for fitness-to-own tests, disqualification lists or enforcement powers over non-lawyers. That would not be in line with Sir David Clementi’s recommendations; nor would it be in the consumer interest. It would give no guarantee of consumer protection, and it would not provide for a mechanism to ensure that professional principles prevail.
Some changes could be made to the Law Society’s rules to create further safeguards, but they would have to be pretty complex and extensive—along the lines of schedules 11 and 13, for example—to ensure fully effective regulation of non-lawyer managers and owners. I am not sure that such changes could be achieved through secondary legislation or that it would be appropriate proceed in that way.
 A key principle of part 5 is that the regulatory bodies must demonstrate to the board that they are competent to enforce a complex, potentially interventionist, regime. If they cannot do so, they will not be designated as licensing authorities, and clearly, that must apply to the Law Society as it would apply to any other regulatory body.
That brings me to another key principle that has been constant throughout our development of policy on ABS, which is that there should be new opportunities based on increasing competition and creating a level playing field between regulators. The amendment would do the opposite. It would allow the Law Society to regulate certain types of ABS firms in advance of other regulators, without having to demonstrate to the board that it is fit to do so.
I turn now to amendment No. 268, which was again proposed on behalf of the Law Society. I suppose that it offers a less extreme alternative to amendmentsNos. 259 to 262. This amendment also seeks to exclude bodies with non-lawyer management from the ABS licensing regime, but this time on the condition that those managers do not provide services to clients. Therefore, the practice would also not be bound by any of the safeguards in part 5, and it could develop in advance of part 5 being implemented. Once again, I am not convinced that that is an appropriate way forward at this stage.
I shall now consider amendments Nos. 256 and 257, as well as new clause 14, which were inspired by the Institute of Chartered Accountants. Again, the ICA has proposed a more detailed amendment, also with the provision for 25 per cent. of non-lawyer managers. In this case, certain additional requirements would apply to such practices, by virtue of new clause 14.
Both the Law Society and the ICA cite Sir David Clementi’s report, arguing that the Government are not being sufficiently proactive in facilitating all the different forms of legal disciplinary practices identified by Sir David. We are, of course, facilitating those types of practice, but I am not persuaded that we should seek to do so outside the boundaries, safeguards and protections that part 5 will give.
I am aware that one incentive for proposing to facilitate the different forms of LDPs is to avoid delaying the possibility of practices with non-lawyer managers until part 5 is fully implemented. I have a lot of sympathy with that view. I want to allow providers and consumers to take full advantage, sooner rather than later, of the benefits that might be delivered by those types of practice—indeed, by all types of ABS firms.
I also understand that the ICA has applied to become an authorised body for probate services under schedule 9 to the Courts and Legal Services Act 1990. Obviously, I cannot comment on that application, as it is currently being considered. However, I can say that, although I agree that that development may happen some time after Royal Assent, if it were to happen, that would be one means by which the ICA and its members could become part of a more integrated practice ahead of the formal commencement of part 5.
 Apart from that, however, in general terms, the management of law firms by non-lawyers is a territory that is, in many respects, unfamiliar and complex. Therefore, I am very keen to ensure that the implementation and the safeguards are right. I believe that the presence of the board is absolutely vital to ensuring that that happens, as are the regulatory objectives; even more important is the need for effective regulatory powers over non-lawyers.
Of course I recognise that the amendments proposed by the ICA make a concerted effort to give effect to some of the safeguards that Sir David’s report concluded should apply to LDPs, particularly in seeking to ensure that those managers who are non-lawyers are fit and proper persons. Even so, I must say to the hon. Member for Huntingdon that there is a risk that these amendments would leave us without some of the vital elements that part 5 will provide, which Sir David identified as being essential for the effective regulation of firms with non-lawyer managers.
 It is not clear in the amendments where the boundaries of the new clause would be or how it would be monitored or enforced. It leaves scope for some pretty big discrepancies in terms of the way different approved regulators might apply it. I do not think that the restriction of the proposed exemptions to bodies in which non-lawyers do not provide services to clients is practical or effective. It still leaves some scope for uncertainty, regulatory gaps and potentially even the emergence of multidisciplinary practices by the back door.
If a body’s business is the provision of legal services to the public, it is difficult to see where the line would be drawn. I understand that the proposal would be intended to cover non-lawyers in finance and IT functions, but an IT partner might be responsible for using IT strategy to improve client service and business development. They might even oversee the provision of IT services to clients in conjunction with legal services. Unless we have a clear and fully developed statutory framework, it is difficult to see how the boundaries would be interpreted and enforced.
We might create a grey area of regulated practice that could lead to regulatory gaps in places where the part 5 safeguards ought rightly to apply. There is no provision for a head of legal practice or a head of finance and administration, which I believe are key to ensuring that the professional principles really do apply on a practical day-to-day basis.

Jonathan Djanogly: Presumably, if the outside professionals were in a minority in the firm, they would be regulated as part of the firm.

Bridget Prentice: No. Under part 5, once non-legal professionals are involved, there must be a head of legal practice and a head of finance and administration. I understand where the hon. Gentleman is going, but the proposal is sufficiently far away from that provision to make me doubt whether it would be satisfactory.

Jonathan Djanogly: The Minister will not find a law firm that does not have a head of practice. She will hardly find one that does not have a head of finance. She seems to be detached from the reality of what is happening out there.

Bridget Prentice: I like to think, given all our discussions with all the legal professionals as well as the consumer groups, that I have a pretty fair idea of what is going on out there in terms of the provision of legal services. The safeguards in part 5 are an essential part of the Bill. To move so far away from them would undermine that. I am therefore reluctant to accept the amendments.
I recognise that that there is an attempt to ensure that non-lawyer managers are fit and proper, but the only way to enforce that is to apply sanctions against the body itself. In my view, robust enforcement powers over the non-lawyer managers themselves are essential, particularly as such managers may be not only individuals, but companies.

Jonathan Djanogly: What about the differentiation between an individual who is regulated under another regulator—for instance, an accountant going into the law firm—and a non-regulated individual?

Bridget Prentice: That is the key point. Let me finish on part 5. In contrast to the proposed new clause, it creates statutory powers to fine and discipline non-lawyer managers and to refer them to the board for inclusion on a public disqualification register. Where managers are also owners, as in partnerships and limited liability partnerships, all the powers in schedule 13 will also apply. Schedule 13 is quite a detailed and complicated part of the Bill.
Part 5 will ensure that all those powers apply in a way that the proposed new clause would not. Part 5 is more facilitative than restrictive. ABS firms often have a complex structure, and strong powers will sometimes be required properly to regulate such practices. It is therefore appropriate that the approved regulators should be able to satisfy the board that they are competent to apply the requirements of part 5.
Although I have some sympathy with the institute’s position, I want the licensing framework to ensure that practices with non-lawyer managers or owners, and the bodies that regulate them, will be fully accountable and subject to effective safeguards. Sympathetic as I am to concerns about the desirability of encouraging ABS sooner rather than later, I want to ensure that we get it right. Even with the amendments, I see no obvious way to meet those concerns without creating other drawbacks that will be just as problematic, if not more so. None the less, I want to consider whether thereare alternative solutions. I therefore ask the hon. Gentleman to withdraw the amendment.

Jonathan Djanogly: I find the Minister’s response rather disappointing and, in some ways, frustrating. She started by saying that she had some sympathy with the basic concept. She went on to say that it would require complex and extensive changes. She went through each of them, throwing in all the problems one could care to mention.
They are probing amendments. I am not saying that there are no problems with the clauses. The Minister then sighed rather dutifully and told us why none of it would work and why she was not totally convinced. Unlike the union provisions, these provisions have been in place for a long time. They were raised in the other place, there has been extensive consultation on them, and they were discussed by Clementi. No one is saying that they have a problem with the idea in principle. I might be wrong, but no Members have said today that they have a problem of principle with the concept.
Frankly, the Government have had plenty of time to develop a framework, and I find the Minister’s response rather weak. She now says that she wants to consider the matter again. I am pleased to hear her say at least that much, but here we are in Committee and we are no further forward. I hear what she says, and we will follow it up. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses18and 19 ordered to stand part of the Bill.

Schedule 3

Exempt persons

Bridget Prentice: I beg to move amendment No. 129, in schedule 3, page 130, line 14, leave out from ‘individual’ to ‘in’ in line 15 and insert ‘whose work includes assisting’.

Frank Cook: With this it will be convenient to discuss Government amendments Nos. 130 to 133.

Bridget Prentice: These are technical amendments—I know that some people get a little worried when they hear that—that correct anomalies in the current exemption provisions in schedule 3. They relate specifically to exemptions for persons working under the supervision of authorised persons in relation to rights of audience, reserved instrument activities and probate activities.
Although all the applicable exemptions are currently effective to cover employees working under supervision of authorised persons, they do not always effectively cover partners or other managers in the same way.For some bodies—for example, licensed bodies under part 5—the exemptions cover both mangers and employees, while in other cases, such as solicitors’ partnerships, they do not. In other cases, the application of the exemption is not as clear as it might be.
The Law Society tells me that there are practical as well as legal reasons for achieving greater consistency. For example, under the current provisions, if a legal executive is employed by a firm of solicitors, he or she will not be authorised to conduct reserved instrument activities, but may nevertheless do so under supervision of a solicitor, by virtue of the exemption in schedule 3. If that legal executive became a partner, that would no longer be possible, because the exemption would cease to apply, which is clearly an inconsistency. I see no reason why partners or other managers should notin principle benefit from the same exemptions as employees. The amendment is therefore intended to make the position clearer and more consistent. On that basis, I commend it to the Committee.

Jonathan Djanogly: We agree to the amendment.

Amendment agreed to.

Amendments made: No. 130, in schedule 3, page 131, line 37, leave out paragraph (b).
No. 131, in schedule 3, page 131, line 39, leave out paragraphs (d) to (f) and insert—
‘( ) P is a manager or employee of a body which is an authorised person in relation to the activity, and E is also a manager or employee of that body.’.
No. 132, in schedule 3, page 133, line 10, leave out paragraph (b).
No. 133, in schedule 3, page 133, line 12, leave out paragraphs (d) and (e) and insert—
‘( ) P is a manager or employee of a body which is an authorised person in relation to the activity, and E is also a manager or employee of that body.’.—[Bridget Prentice.]

Schedule 3, as amended, agreed to.

Clause 20 ordered to stand part of the Bill.

Schedule 4

Approved regulators

Bob Neill: I beg to move amendment No. 255, in schedule 4, page 142, line 14, leave out sub-paragraph (3) and insert—
‘(3) Alterations are exempt unless the Board has directed that they are not to be treated as exempt for the purposes of this paragraph.’.
By way of work sharing on the Opposition Benches, I have been asked to move the amendment, the effect of which would be to change the wording of paragraph 19(3) of the schedule, on page 142, and insert fresh wording. We seek to reverse the presumption that the advance approval of the Legal Services Board should be required to changes to approved regulators’ regulatory arrangements. That has been suggested to us by—and it is supported by—the Law Society, which is particularly involved in that type of work.
 We have taken on board the logic of the Government’s own position. They have repeatedly made it clear that the primary responsibility for regulation should rest with the approved regulators and that the Legal Services Board should have a supervisory role over them. If that structure is to work in a meaningful way, it is important that we should start from the presumption that the approved regulators can be trusted, as they are the people in whose hands we place the bulk of the day-to-day operation.
 Under the Bill, regulatory functions will have to be separated from any representative function that the approved regulator already holds. As some of us mentioned earlier, that has already been done by the Law Society and the Bar Council, under existing regulation. For example, all the members of the Law Society’s regulatory arm, the Solicitors Regulation Authority, are appointed on merit rather than elected, as members of the Law Society’s council are. Members of the Law Society’s representative council—people who are, in effect, elected by solicitors—are ineligible to serve upon the Solicitors Regulation Authority, so there is a separation. The Bar Council has achieved the same result as far its part of the profession is concerned.
Furthermore, the approved regulators will, I hope as a matter of ordinary good practice, consult on proposed changes to their regulatory arrangements before they are made. That consultation will include representatives of consumers and of the regulated sector. It would be perfectly possible to ensure that the Legal Services Board was included by the approved regulators in those consultations if they intended to make any such changes.
 Under those circumstances, the schedule’s requirement to secure approval by the LSB before changes to regulatory arrangements come into effect seems unnecessarily burdensome and regulatory. Every time one wants to change one’s internal regulations, one will have to secure advance approval from the LSB—not just consult it. We are concerned that that requirement may significantly clog decision making, which will make it harder for approved regulators to respond appropriately to changing circumstances.
It is important to bear in mind that the legal profession is a dynamic profession, and that the market for legal services is dynamic. Circumstances change rapidly, and as we have already discussed, we are responding to an intensely competitive international market. It is important that the approved regulatory bodies can respond swiftly and flexibly to their circumstances within the consumer protection framework, on which we are all agreed.
Past experience gives us some concern. The legal services consultative panel was established in the Access to Justice Act 1999, and that procedure for making changes was found to be complicated, convoluted and lengthy. It was even worse than its predecessor body, the Advisory Committee on Legal Education and Conduct, which I remember from when I still practised at the Bar. For example, it took several years for the ACLEC process to deal with the Law Society’s rules on rights of audience, and a similar length of time for the society’s recent revisions to its rule book to go through the legal services consultative panel. I am sure that Ministers do not intend to introduce a process for making sensible changes to the operation of the rule book which could take that amount of time.
The Bill already permits the LSB to designate particular categories of changes to regulatory arrangements as exempt from prior approval. The precedent is already in the Bill, but it is inevitable that as a new body, fresh on the turf, the LSB will be cautious in the exercise of its power. Few categories of rule are likely to be exempted to start with, and the process of securing LSB approval is likely to become a significant obstacle to desirable change. It will be a regrettable unintended consequence of the legislation, which does not fit with its overall intention.
There are also considerable potential resource implications for the requirement to seek advance approval for those changes. There is a process for considering the merits of proposed changes throughout the range of regulatory arrangements. The schedule already sets out a large number of approved regulators, so a number of bodies will be caught by the legislation, which is likely to be time-consuming and expensive. If we return to our proposition that the approved regulators are people who we are satisfied can be trusted, are properly constituted and have robust internal systems, how much added value will we receive for such expense and potential delay?
We can tackle that practical issue by reversing the presumption that changes require the approval of the board in advance. Instead, under our amendment, changes would be exempt unless the LSB designated them as requiring advance approval. The last point is important for balance. If it became apparent that the category of rule change might be controversial and raise new and difficult issues, the Law Society would still be able to designate—

Frank Cook: Order. This afternoon, the Chair will pass to Sir Nicholas Winterton. Confident, of course, that the Committee will treat Sir Nicholas with the same respect and good humour that you have displayed towards me, I wish you well in the continuation of your deliberations.

It being One o’clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at Four o’clock.